11/08/2007 @ 9:47PM

First Solar Goes Supernova

First Solar isfilling investors with confidence. Following a strong earnings report, the high-flying stock surged another 34%.

After Wednesdays closing bell, the Phoenix, Ariz.-based solar panel maker announced third-quarter earnings that beat Wall Streets expectations, sending its shares up 34.3%, or $57.31, to $224.43 on Thursday.

That left it trading with a jaw-dropping valuation of 253 times its trailing 12-month earnings, and 158 times analysts’ 2008 projections.

Investors may have had to do a double take when reading its earnings, which grew no less than 969.8% to $46.0 million, or 58 cents per share, from the $4.3 million, or 7 cents per share, reported last year.

The earnings came on the back of a 289.7% increase in sales to $159.0 million from the $40.8 million reported in last years corresponding quarter.

The recent quarter’s results included a one-time tax benefit of $7.5 million, or 9 cents per share. The were also based on a total of about 79.1 million shares outstanding, while the 2006 quarter’s results were based on about 58 million shares outstanding.

Analysts polled by Thomson Financial expected a profit of 19 cents per share, excluding the tax benefit, on $120.4 million in revenue.

First Solar is a maker of so-called “new generation thin-film” solar panels. Instead of crystalline silicon, First Solar’s thin film solar panels use Cadmium Telluride. Others use mixtures of other materials, such as copper, indium and gallium.

“The third quarter of 2007 concludes another important milestone in our mission towards grid parity. We successfully completed the ramp of our German production facility well ahead of schedule, which afforded us with highly leveraged growth during the quarter,” said
Mike
Ahearn
Mike Ahearn
, First Solar’s chief executive officer.

Management also set its projected 2008 sales range between $760 and $800 million, above Wall Street’s anticipated $701.1 million, with panel production between 370 and 390 mega watts.

Thursdays announcement comes after the company announced new agreements on Monday to expand contracted panel volume by a total of 557 megawatts of solar panels, allowing for additional sales of approximately $1 billion, between 2008 and 2012 (See “First Solar Shines”).

According to Deutsche Bank analyst Steve ORourke, the companys results came in well ahead of expectations as its German production facility ramped ahead of schedule, and incremental improvements in efficiency, production throughput, and currency exchange rates drove panel cost per watt to a new low of $1.19.

With this, ORourke raised his price target to $220 and reiterated his buy rating.

CIBC World Markets analyst Adam Hinckley set his price target at $230.

“The company has proved its ability to rapidly replicate facilities through its ‘copy smart’ program at its German facility, which began operating this quarter, one quarter ahead of schedule,” Hinckley said.

Hinckley went on to note that this ability to replicate and rapidly ramp-up will translate to similar schedules for the four Malaysia facilities.

Although First Solar’s tide has lifted most solar boats in the morning, some peer stocks started to fall, following Federal Reserve Chairman Ben Bernanke’s speech about rising intereset rates (See “Bernanke On Economy: Bad Winter, Better Spring”), and fears that the technology sector would start feeling pain from the credit crunch (See “Tech Turns Cold”).

Evergreen Solar
rose 17.1%, or $2.34, to close at $15.99, and the American depositary receipts of Chinas
Suntech Power Holdings
were up 0.6%, or 37 cents, to $65.17.

SunPower
, a leader in the solar sector, fell 2.1%, or $3.07, to $141.93.

After the bell, SunPower announced that its Spanish subsidiary will engineer, procure equipment for and construct three solar electric power plants totaling approximately 21-megawatts in the Castilla La Mancha region of Spain.

Looking beyond First Solar’s third quarter, O’Rourke had some exciting comments on the companys future. First, he noted that it had alluded to U.S. utilities as a potential new market under Renewable Portfolio Standard mandates, potentially opening a substantial ground mount power plant market for the company, which he believes could begin in 2009/2010.

We also anticipate First Solar could move toward selling energy on its own as a potential long-term revenue stream, he added.

ORourke said the companys price to earnings valuation could command a premium to its peers, due to having the lowest panel cost to watt by a wide margin, no dependency on polysilicon and positive operating cash flow.